Eminent Domain Report

In California, a fundamental principle of eminent domain law is that an owner of property acquired by eminent domain is entitled to just compensation for the property interests taken (Code Civ. Proc. §1263.010). 

However, what if the acquisition for the public project involves only a portion of the owner’s property interests? This question arises quite often when a portion of an owner’s property is acquired for street or freeway widenings, grade separation projects, expansion of property already dedicated to an existing public use, as well as many other types of public projects.  

California law provides that if the property being acquired is part of a “larger parcel,” the owner may also be entitled to just compensation for the damage – i.e., severance damages - caused to the remaining portion of the property not being directly acquired, if the remainder property is damaged through the acquisition of the part taken.  (Code Civ. Proc. §1263.410(a).) Thus, severance damages arise when a public agency is taking a portion of an owner’s property, leaving the owner with a “remainder” parcel that may suffer a diminution in value as a result of the remainder’s being “severed” from the part taken. 

Entitlement to payment of just compensation for severance damages is therefore conditioned on a determination first being made that “the property taken is part of a larger parcel.” (Code Civ. Proc. §1263.410(a).) While the analysis of the compensation owed for severance damages to a remainder property often involves only a single parcel, i.e., a single larger parcel, from which a portion is being acquired by eminent domain, a more complex analysis is required when one property is being acquired, either in whole or in part, and the same owner owns other parcels either adjacent to or near the property being condemned and all of property may comprise a “larger parcel.”

The term “larger parcel,” however, is not defined by California statutes and the meaning of the term has been developed through judicial decisions. Those legal decisions have established a three-prong test used by courts, with each prong needing to be satisfied before a finding that the part being acquired is part of a ‘larger parcel,’ with the three prongs being: (1) unity of title; (2) contiguity of the parcels; and (3) unity of use.  (City of San Diego v. Neumann (1993) 6 Cal.4^th 738, 745.)   

Unity of title typically requires the same party to have ownership of the fee simple interest in both the part taken and the remaining property. (People ex rel Dept. of Pub. Works v. City of Los Angeles (1963) 220 Cal.App.2d 345, 361-362.) Again, when a single parcel is being impacted, the unity of title is normally not at issue, but when multiple parcels may constitute a larger parcel, careful analysis of the title and agreements impacting the properties is required.

Contiguity generally requires that for multiple properties to be deemed a “larger parcel,” the properties under consideration must be contiguous and not be physically separated. Courts in California have long held that parcels which are not contiguous and are separated by property not owned in fee by the same owner, that such properties are not to be regarded as a single larger parcel merely because of unity of use. (People ex rel Dep’t. of Public Works v. Dickinson (1964) 230 Cal.App.2d 932, 935-936.) Simply stated, “contiguity is ‘ordinarily essential.’” City of Los Angeles v. Wolfe (1971) 6 Cal.3d 326, 333 - citing People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 423; People v. Thompson (1954) 43 Cal.2d 13, 18.

Unity of use generally requires the property under consideration to be put to one overall use. (People ex rel Dep’t of Pub. Works v. International Tel. & Tel. Corp. (1972) 22 Cal.App.3d 829, 834-835.) In City of San Diego v. Neumann (1993) 6 Cal.4^th 738, 741, the court held that “separate legal parcels may be aggregated and considered as one ‘larger parcel’ when the owner establishes a reasonable probability that all of the contiguous commonly owned lots will be available for development or use as an integrated economic unit in the reasonably foreseeable future.”      

In People v. Ocean Shore Railroad (1948) 32 Cal.2d 406, 424 the California Supreme Court stated that the “primary test for severance damages is contiguity, and while an existing unity of use may warrant an award, none can be allowed where the property is not contiguous and there is merely a possible or prospective and not a presently existing, unity of use.”  

Of course, as is the case with many general rules, exceptions to the general rules exist.  For example, in the case of City of Los Angeles v. Wolfe (1971) 6 Cal.3d 326 an exception to the general rule that contiguity is essential was found when properties that were physically separated from each other but were already improved with a cohesive development – i.e., one parcel was already improved with parking facilities that served the medical office building on another property owned by the same owner – were held to be a larger parcel.

While these rulings might appear to be in conflict, the key to understanding the exception to the general rule lies in understanding how the analysis of contiguity differs depending on whether the properties are being used as an integrated economic unit, or whether the mere potential exists that such a unity of use may arise in the future. Where an integrated use already exists on the date of value, courts will sometimes overlook a minor lack of contiguity in determining the larger parcel. However, where the unity of use does not exist on the date of value but is merely prospective and a speculative future use, contiguity is a mandatory element to a finding of there being a larger parcel.

Again, before a portion of property being acquired by eminent domain can be found to be part of a larger parcel, the general three prong test of unity of title, contiguity of the parcels, and unity of use must be found. However, exceptions to the general rules exist and require a careful factual and legal analysis of the properties’ title and ownership history, their current and prospective uses, their location to one another, the title and interests in any properties separating the properties under common ownership, and the existing development of the properties.

If you have any questions regarding larger parcel issues or severance damages, please feel free to reach out.